B is corrent. The present value of the eight $500,000 lease payments is given to be $2,934,000 (cash selling price of the equipment). Since $500,000 is paid at the inception of the lease, the book value of the lease payments receivable (total minimum lease payments minus unearned interest income) outstanding for the last 9 months is $2,434,000. The 10% interest thereon is $243,400, but only 3/4 (9 months/12 months) of this amount, or $182,550, is associated with the period ending December 31, year 1.
A is incorrect. The present value of the eight $500,000 lease payments is given to be $2,934,000 (cash selling price of the equipment). Since $500,000 is paid at the inception of the lease, the book value of the lease payments receivable (total minimum lease payments minus unearned interest income) outstanding for the last 9 months is $2,434,000. The 10% interest thereon is $243,400, but only 3/4 (9 months/12 months) of this amount, or $182,550, is associated with the period ending December 31, year 1.
A is incorrect. The present value of the eight $500,000 lease payments is given to be $2,934,000 (cash selling price of the equipment). Since $500,000 is paid at the inception of the lease, the book value of the lease payments receivable (total minimum lease payments minus unearned interest income) outstanding for the last 9 months is $2,434,000. The 10% interest thereon is $243,400, but only 3/4 (9 months/12 months) of this amount, or $182,550, is associated with the period ending December 31, year 1.
D is incorrect. The present value of the eight $500,000 lease payments is given to be $2,934,000 (cash selling price of the equipment). Since $500,000 is paid at the inception of the lease, the book value of the lease payments receivable (total minimum lease payments minus unearned interest income) outstanding for the last 9 months is $2,434,000. The 10% interest thereon is $243,400, but only 3/4 (9 months/12 months) of this amount, or $182,550, is associated with the period ending December 31, year 1.
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